Alabama

Here's a tip: Leave the tipped minimum wage alone: reader opinion

July 24 marked the five-year anniversary of the last increase in the minimum wage, both nationally and in Alabama. (The state is covered by the federal standard.)

President Obama used the occasion to call for another pay hike of nearly 40 percent. But that's not all: The president has also been encouraged by labor union-backed advocacy groups to support a proposal that would raise the base wage of tipped employees (e.g. servers and bartenders) in Alabama by 232 percent.

If that sounds like a radical idea, it's because it is — and both employees and their customers are worried about the consequences.

Federal law says that tipped employees must earn at least the full minimum in combined wages and tip income. If these don't add up to the minimum, the employer must make up the difference. This system works out well for the employee: In self-reported earnings alone, Census Bureau data show that servers and bartenders average $13 an hour nationwide. Top earners collect $25 an hour or more.

It's a compromise that's favorable to restaurants and the people they employ: Servers receive take-home pay that's far above the minimum wage, and restaurants can maintain the roughly three cents in profit they keep from each sales dollar.

The proposal the president supports would undo this balancing act and wipe out the profitability of many of the country's full-service restaurants. The math isn't hard to understand: Faced with a dramatic wage hike, the business can either raise prices or cut costs if they want to keep their doors open. Restaurants' price-sensitive customer base can always opt to stay home if the cost of a meal out rises too far. That's why businesses are often forced to reduce staffing levels instead.

In Washington, with the highest state minimum wage in the country, Seattle Weekly reports that many restaurants have stopped hiring busboys and started keeping fewer servers on the floor per shift. Economists from Miami and Trinity universities studied these trends nationwide and found a direct relationship between a higher tipped minimum wage and cutbacks in restaurant employment.

Technology makes these changes even easier: Chains such as Chili's and Chevys Fresh Mex have introduced tabletop ordering tablets that dramatically reduce the need for service staff.

Restaurants have other options, including an embrace of the European model where tipping is eliminated in favor of a set service charge on the bill. But two recent surveys suggest that very few people favor this result.

Nearly 70 percent of people who reported working in a restaurant and earning tips rejected even a $15 base wage if it upset the tipping status quo. Similarly, over 80 percent of customers opposed any change in the current tipping system that resulted in higher meal prices — even if it meant that they were no longer expected to tip.

If the president has his way with a tipped wage hike, customers will still pay for some of it through higher prices and some employees will pay through reduced opportunities. There's an old saying that applies here: There's no such thing as a free lunch.

Michael Saltsman is research director at the Employment Policies Institute, which receives support from restaurants, foundations and individuals.